A fairer Deal for Birmingham

No more #Brumcuts

• West Midlands MPs are fighting for a fair deal for Birmingham

• Birmingham has already been hit by the biggest cuts in local Government history - Birmingham City Council will have to make savings of around £258 million over the next four years on top of the £567 million annual savings the council has already made since 2010/11. This includes £90 million in spending reductions next year alone.

• The city has been hugely disadvantaged by the Government funding formula that has benefitted Tory shires over high-need areas, so too have our police service and fire and rescue service.

• Conservative cuts on the scale proposed will put social care, emergency services and the protection of the most vulnerable at breaking point. Birmingham needs a fair funding deal now.

1. A Fairer Funding Formula

We ask the Government for:

Fair funding, now – The Government have admitted that their previous approach disadvantaged the city, and yet they are dragging their feet on replacing it and rectifying the damage done. With the current unfair formula set to rob us of £98 million in the next 2 years, Birmingham cannot afford the legacy of years of unfair funding.

A fair deal on social care – The funding Birmingham needs for caring is not set to be introduced until the later years of this Parliament, whereas the increasing cost of adult social care is impacting on Birmingham now. The funding should be brought forward into 2016/17 to plug Birmingham’s social care funding gap.

Fair Funding for the West Midlands Police Service and Fire and Rescue Service

2. Context

As announced in the spending review, the local government central grant is to be cut by more than a half over the next four years, from £11.5bn this year to £5.4bn in 2019/20, a drop of 56%. Meanwhile, councils’ self-financed expenditure (from revenue and business rates) is expected to increase by 13.1% over the same period – from £28.8bn to £35.1bn.

The Treasury have said that, taking into account income from both council tax and business rates – which they forecast to increase, councils will need to find real-terms savings of 6.7% in this Spending Review period, compared to 14% at SR2010. However, as has been the case for the past 5 years, spending reductions will not be distributed fairly across the country, with high-need areas such as Birmingham expected to be particularly disadvantaged by the central Government cuts, and to benefit proportionally less from the additional income-raising powers. For example, one of the many problems raised with funding care through council tax is that areas with a low council tax base will be unable to bridge the gap left by central government funding reductions.

Given the frontloaded nature of the cuts and the 2016-2017 looks set to be the toughest year of this four year Spending Review period for local services. This is particularly the case for Birmingham given the failure by the Government to implement a fairer funding formula in 2014/15 or 2015/16.

Summary of local government finance announcements:

Funding reductions: The local government central grant is to be cut by more than a half over the next four years, from £11.5bn this year to £5.4bn in 2019/20.

Business rates: By the end of the parliament, councils will be able to retain 100% of all business rate revenue, while the uniform rate is also being abolished.

Social care precept: Councils with social care responsibilities are also being given 2% additional Council Tax flexibility, on top of their existing referendum threshold. However, according to the King’s Fund, even if all councils were to do this every year for the next four years, there will still be a funding gap in social care of £2.8bn to £3.5bn by 2020.

The Better Care Fund: The Government have introduced an increase of £1.5 billion in the Better Care Fund by 2019-2020. However, councils including BCC are concerned that the extra investment will not be fully in place until the end of this decade.

Care Act implementation funding: The Government has announced that the funding earmarked for preparation for implementation of Care Act 2014 will be included in the baseline for calculating Revenue Support Grant. The element is worth £307.7 million in 2016/2017, growing to £513.9 million in 2019/2020.

Policing precept: The limit on increases in the policing precept without a referendum for 2016/2017 is proposed to be capped at 2 per cent, with the exception of Police and Crime Commissioners and shire district authorities which are in the lowest quartile by council tax level, for which a higher limit of either 2 per cent or £5 (on a Band D bill) applies.

The West Midlands is one of the 10 PCCs and shire district authorities that can raise the “police precept” by £5. The other 9 are as follows - Northumbria, West Yorkshire, Sussex, Essex, Kent, Hertfordshire, South Yorkshire, Greater Manchester and Cheshire. This ‘Police Tax’ could hit 5 million people, breaking the promise that Osborne would protect the police budget.

Cuts in Birmingham

Birmingham City Council’s current estimate is that they will have to make savings of around £258 million over the next four years on top of the £567 million annual savings the council has already made since 2010/11. This includes £90 million in spending reductions in next year alone.

The Audit Commission report, ‘Tough Times 2013: Councils’ financial health in challenging Times’ (November 2013), said: “Councils in the most deprived areas have seen substantially greater reductions in government funding as a share of revenue expenditure than councils in less deprived areas.” Birmingham is a prime example of this – the city has lost £85 million in funding for the 2016/17 financial year because of the Government’s failure to implement a fairer funding formula before now,growing to £98m by 2017/18.

Birmingham has been hit so disproportionately hard because of the unfair local government funding formula which does not take into account local council tax raising powers. Birmingham has a small relative tax base, and therefore relies far more on central Government funding than richer, lower need areas.

This means that Birmingham will see a reduction in spending power of 4.8% over the next 2 years, compared to the national average of 2.8%.

Although the Government has finally admitted that the current formula is unfair, the new model will not come into effect until 2016/17. Birmingham has already suffered disproportionately large cuts for the past two years and is still suffering cuts in 2016/17 onwards. The change in approach to further cuts is clearly welcome, but nothing has yet been done to address the disproportionate impacts of the previous approach and its corresponding impacts on protected and vulnerable groups.

Additionally, the new funding formula does not take into account the Social Care Precept – this would mitigate the late introduction of Improved Better Care Fund on low council tax base authorities. The Fund may not be fully in place until the end of this decade, leaving Birmingham with a funding black hole for social care in the meantime.

Exacerbating the impact of the unfair funding formula is the fact that the additional tax raising powers intended by the Government to partially compensate for cuts will raise proportionally less income for Birmingham compared to other more affluent areas. For example, Westminster Council is expected to rake in £1.6billion a year in business rates - while Coventry, West Midlands, takes £118m despite having more residents.

For Birmingham City Council to have rapid growth that could mitigate the net spending power reduction of £43.3m in 2016/17, business rates income would need to increase by a further £88.4m, which is clearly unachievable.

4. Consequences

Cuts have taken place on such an extreme scale across the country that local authority provision is now being reduced to little more than core statutory services, while the budgets for libraries, parks and playgrounds, rubbish collections, museums, sports facilities, children’s centres, youth clubs, planning and environmental quality have already been slashed to the point at which these can barely function.

Due to the size of the cuts that have been made to Local Government in the 2016/17 settlement and in particular the way in which they have been distributed, in addition to those already made in previous years, Birmingham City Council have said “it is inevitable that this will impact upon protected groups”. 63% of Birmingham’s net budget in 2015/16 is on adult and children’s social care.

Although the Government says that ultimately the impact on protected groups is dependent on decisions made at local level, the scale of the cuts now are such that local authorities, are struggling to provide the statutory minimum level of service to the key groups.

Birmingham is a caring city - there are 112,000 carers in Birmingham, and yet the new social care levy does not go far enough to fill the funding gap in the care sector. As a result, social care will see the most savings, a total of £92 million over four years. Much of it will be achieved by reducing dependence on acute and residential care.

Under the funding reductions and timescales proposed, those that require care are not guaranteed the independence and dignity they deserve.

According to the Joseph Rowntree Foundation, social care spending has fallen in real terms in the most deprived communities by £65 per head or 14%, whilst social care spending has risen in real terms in the least deprived communities by £28 per head or 8%.

Some of the huge challenges faced by the Council in the coming years include those arising from general inflation, cost pressures in the care sector, increases in the number of adults and children needing support and rising levels of need, increases in demand for everyday services as the population grows, pressure on homelessness budgets and increases in core costs such as national insurance, the National Living Wage and pension contributions.

Emergency services

Police

Central Government funding to the police reduced by 25% in the last Parliament, resulting in the loss of 17,000 police officers overall. The cuts seriously disadvantaged high need but less affluent regions with lower local tax raising powers, and the West Midlands is a prime example of this.

The West Midlands Police Service has seen its budgets cut by £126 million over the past five years

Despite the fact that recorded crime and threats to the community have risen in the West Midlands and fallen in Surrey, the West Midlands Police Service’s budget fell by twice as much as that of Surrey Constabulary.

As a result, despite being ranked one of the most efficient forces in the country by HMIC, the West Midlands has lost 1,500 police officers.

Recorded crime in the region has gone up by 2%, violent crime has gone up by 12% and sexual assault has gone up by 24%.

Now, despite Osborne’s pledge to “protect police funding”, the West Midlands police force will see a further cash reduction of £2.5m in 2016/17.

Fire

Over the course of the last Parliament the government stripped away over 30% from the fire and rescue budget. Fire and rescue authorities have managed funding reductions well, but reductions in firefighter numbers have been inevitable, resulting in the loss of nearly 7,000 frontline jobs, including 275 firefighters in the West Midlands. Individual fire stations are at breaking point with firefighters covering larger areas on watch. There has also been a reduction in the number of operational fire appliances (such as fire engines) by 24% in the West Midlands over the course of the last Parliament.

The NAO also highlighted that spending power has fallen most in areas assessed by the Department for Communities and Local Government (DCLG) as having highest levels of fire need. Again, in the Birmingham, a failure by the Government to take into account the proportionally lower local tax base means that the area has been hit harder by extreme cuts.

Over the next few years, provisional estimates suggest that the local Government settlement means that the West Midlands Fire and Rescue will lose £10 million in further funding reductions. This will take overall losses to £38 million between 2010 and 2020 – a staggering 46% cut.

The average response time to primary fires in West Midlands in 2014-15 was 7 minutes 24 seconds, a minute 24 seconds longer than last year, an increase of 5.7%.

The average response time to dwelling fires in West Midlands in 2014-15 was 7 minutes 6 seconds, an increase of a minute 30 seconds since 2009, 7.6% higher and over a minute longer than the national average

This is despite the fact that the WMFS serves areas of the country that are amongst the most deprived, therefore the occurrence of emergency incidents and their impact is disproportionately worse in those areas.